Pestle and Swot Analysis of Google 2019
Google Inc. is an American search engine founded by Sergey and Larry Page in 1998. It is currently a subsidiary of the holding company Alphabet Inc which currently controls a diverse range of businesses including YouTube, Dialogflow, AdMob, Google Japan, Android and Google environment among others. Google offers more than 50 internet services including Gmail (email), GoogleDocs (online document creation), GoogleDrive (cloud storage) and Android (software for mobile phones, tablets and computers).
With more than 86.2% of the global online search market, Google has become the biggest search engine in the world operating in 219 countries globally, ahead of competitors Bing, Yahoo and Baidu with 6.55%, 3.27% and 1.08% respectively as of 2018 (Statista 2018).
Google has been growing from strength to strength, with its revenue growing from $74.54 bn in 2015, to $109.65billion in 2017 (Statista 2017) with advertising being the biggest contributor to the overall revenue as figure 1 (below) shows;
Figure 1: Google’s global revenue from 2002 to 2017 (in billion US dollars)
2.0 Pestle analysis of Google 2018-2019
2.1 Political environment
2.1.1 The rivalry between China and USA
The tension which has between growing between China and USA through 2017 has heightened due to increased trade tension, intellectual property theft claims, military show down and diplomatic ill will. Among the many allegations by the US government, China is building its competitiveness around technological capability using US technology (Johnson and Groll 2018). US officials further claim that Chinese army elements have hacked Chinese manufactured hardware which is used by most American tech giants and government entities arousing question about the safety of Chinese made technology (Johnson and Groll 2018).
According to a report by Wojazer (2018), Google’s strategic partnership with Huawei has been questioned by US law makers claiming it a serious risk to US national security. This great rivalry is a threat to USA giant tech companies who have formed partnerships with Chinese companies as it will affect their USA operations.
Trump has also imposed tariffs worth $60 billion on goods imported from China annually, a threat to tech giants like Google. According to Simonite (2018), these tariffs are meant to curb down intellectual property theft will negatively affect cloud based companies like Google, Facebook and Microsoft which rely on Chinese technology and manufacturing industries.
Chinese companies are vital to the open computer project that companies like Facebook, Google and Microsoft use to make servers and other data centre equipment thus a major threat (Simonite 2018). These tariffs would also disrupt the supply chains of tech companies resulting in delayed production thus a threat to tech companies like Google (Horowitz 2018).
2.2 Economic environment
2.2.1 US strong economic growth
US strong economic growth continues to present growth opportunities for companies like Google. The United States is world’s leading economy in regard to GDP, the country’s year on year GDP was 4.1% growing by 1% in the second quarter of 2018 five tenth of 1% higher than 0.5 in the first quarter (Countryeconomy.com 2018).
As of May 2018, payroll gained by 223,000 above market expectations of 188,000 with unemployment rate hitting 18 year low of 3.8% (Cox 2018).
According to Cox (2018), job growth, wage gains and tax cuts are giving customers buying power and confidence. Retail Think Tank (2016) noted that, changes in consumer confidence are correlated to changes in consumer spending, if consumers are confident about the economic outlook and their personal circumstances, they spend more. This is thus an opportunity for Google to grow since more customers will be able to afford its services.
2.3 Social environment
2.3.1 Ad blocking
One of the more recent threats Google currently faces is the advent of adblocking by consumers. While Google has incorporated adblocking in Chrome, users frustrated by display advertising from online advertisers are increasingly turning to adblocking software and browser add-ons as they seek ad-free browsing experiences (Shepard 2018).
2.3.2 The threat of seamless integration
Perhaps a broader threat Google faces is the rise of seamless integration as user platforms such as Facebook or Amazon increasingly offer users one seamlessly integrated user experience. For instance, Facebook now offers its users news feeds, shopping reviews, search and a marketplace where they can shop without leaving the site.
Similarly, Amazon users can search the marketplace using Alexa voice search, and have any item ordered and delivered all under one platform. It is this seamless integration which condenses numerous processes into just a few steps that poses a threat to Google, as users will increasingly seek browsing experiences driven by the intersection of search, voice search, social media and ecommerce all under one roof (Heitzman 2018).
2.3.3 Millennials love for technology
Unlike their predecessors (Generation X and Y), millennials identity is largely shaped by growing up in an interconnected world of smart phones and social media. With an unusual spending power forecast to hit $ 1.4 trillion by 2020, this demographic trusts and relies more on recommendations created by their peers in form of videos, pictures, reviews and comments (Search Engine People 2018).
According to research by Pew Research centre, unlike the older generation, millennials love reading their news instead of watching it with 81% preferring to read digital text to print (Search Engine People 2018). Millennials are more comfortable using their smartphones for their daily browsing needs, this is a great opportunity for tech companies like Google who have made their content mobile friendly.
2.4 Technological environment
2.4.1 The rise of AI and integrated voice search
Artificial Intelligence is a trend that is changing our everyday lives in several ways from shopping, booking cabs and interacting with customer care services among others. According to Konish (2018), AI market is predicted to grow to $50 billion and $100 billion in the next three years.
Under AI, devices and platforms are increasingly being integrated with voice search functionality in a way that bypasses Google search altogether, a trend led by Amazon, which is the leading the way to the future with Amazon Echo voice search technology integrated with Alexa assistant. While voice search alone might not lead to the downfall of Google, it’s the integration of voice search within other platforms such as social media (Facebook) and ecommerce (Amazon) that poses a real threat to Google’s dominance of search (Heitzman 2018).
Consumer devices especially smartphones, tablets and smart speakers can now perform voice searches. This may explain why Google had to introduce Google Home in 2017 as it tries to gain a foothold in a trend that has seen major tech giants join search including Apple with Siri, Microsoft with Cortana and Facebook with Portal (Mintel 2018a).
2.4.2 Rise of smart speakers
Smart speaker or AI enabled speakers is another trend that is growing very fast, tripled in 2017 and isn’t slowing down any time soon. According to Chauhan (2018), at least 75% of households in USA will have smart speakers by the end of the decade up from 7% in 2016. Sales of smart speakers could by 2020 hit 138 only in the US which will be 6 times more than the 23 million sold in 2017 (Chauhan 2018). Google is investing in the trend and expanding its smart speaker line up to offer the market more voice controlled smart home devices and expand its market share. As of 2017, Google smart speakers sales grew to 30% gaining a market share of 18.4% up from 7% in 2016 increasing its competition against the smart speaker giant Amazon (Chauhan 2018).
According to Koetsier 2018), the biggest drivers of this trend are families, younger generation x women and parents, with Amazon and Google currently the market leaders (Koetsier 2018a).
Apple’s Homepod is predicted to gain shares this year while Face Book is working of its own smart speaker and Microsoft planning to bring Cortana to market in Harmon Kardon devices (Koetsier 2018). This growing market is an opportunity for incumbents like Google to grow and win more market shares, even a greater opportunity since the accuracy of its smart speaker has grown to 95% from less than 80% in 2013 giving it a competitive advantage in the growing competition (Graham 2018).
2.5 Legal environment
2.5.1 GDPR rules start to bite Google
New European GDPR privacy rules, requiring all companies to comply with new EU rules on data collection and privacy, have been in effect since May 2018. Under these rules, any company found to be in breach of these privacy rules is liable to pay fines of upto 4 percent of global revenue. Google is already a recipient of a major privacy case filed against it for breaching GDPR privacy rules. According to Kuchler and Khan (2018), the case filed by privacy activist Max Schrems challenges the way Google currently obtains data from users, with claims that rather than Google using informed and specific consent, it uses a form of forced consent. This is following a similar case brought by Max Schrems against Facebook, which the latter lost when EU courts banned the social media site from sharing data with its subsidiary WhatsApp (Kuchler and Khan 2018). EU GDPR privacy rules hence pose a real threat to Google because they ultimately strike at the very heart of its operations, data collection.
2.5.2 The EU proposed copyright rules
The European parliament in 2018 voted to advance digital copyright rules which would force web platforms to pay artists and authors their due recognition, payment and protection before using their content (Shaban 2018). According to the new rules, web platforms like Facebook, or Google owned YouTube, would be liable for copyright violations which may occur when users upload content that’s owned by musicians, authors and other creators.
According to Shaban (2018), these new rules could restrain creativity and free online expression since they will give media platforms and social networks power over what’s allowed online and what’s not. This is a threat to web platform companies like Google since it would require huge investments to comply with copyright changes, massively affecting American users (Shaban 2018).
2.5.3 China’s cyber security laws
The law requires network operators to cooperate with China crime and security investigators and also allow full data access at all times. The law also requires network operators in critical sectors to store within China all data that’s produced and gathered data in the country (Wagner 2018).
According to Wagner (2018), in order to comply to the law, foreign firms must invest in new data servers in China or incur more costs by hiring local service providers which will either way expose them to government spot checks. This is a threat to tech companies like Google that are trying to operate in China.
2.6 Environmental issues
The American Clean Air Act authorizes EPA to establish National Ambient Air Quality Standards (NAAQS) in order to protect health and public welfare and to regulate emissions of hazardous air pollutants (EPA 2017). United States is one of the world’s biggest emitters after China. With its love for big cars, big houses and blasting air conditioners, USA has contributed a lot to the atmospheric carbon dioxide that is currently scorching the earth (Gillis and Popovich 2017).
In response, Google has partnered with UN Environment to change the planet through combining environmental science, Big Data and unprecedented accessibility.
The platform will use Google’s cloud computing and earth observation public catalogs enabling governments, NGO’s and the public to track specific environment-related development targets with a user-friendly Google front-end (UN Environment 2018).
Figure 2: Googles Pestel Analysis
3.0 SWOT Analysis of Google 2018-2019
- Providing the best user and unmatched experience when it comes to search. Google’s search algorithm is constantly updated so that users are constantly provided with only the most relevant searches while still catering to commercial clients with an efficient advertising platform that reaches only the most relevant of consumers (Heitzman 2018).
- Google controls over 90% of the internet market in most European Union member states (Stewart 2018).
- Google’s first mover advantage has helped it to gain at least 80% online traffic giving it a competitive advantage to its competitors (Cooper 2017).
- Google’s search dominance. Google has dominated the search engine market commanding a market share of 86.02% as of 2017 (Cooper 2017).
- Big brand name. Google has become a household name, currently ranked the 3rd most valuable brand (behind Apple and Amazon) by brand consultancy firm, Brand Finance (Tyler 2018).
- Google’s pre-installed software in android phones has helped the company to expand globally, increase its revenue and profits.
- Google’s partnership with Huawei is a weakness that affects the company’s US operations. According to Wojazer (2018), the strategic partnership has been seen as the company’s collaboration with China Government mostly because the tech giant refused to renew its research partnership with the US department of defense. The US government claims that this partnership poses a security threat to USA and consumers.
- Low presence in China since it gives it a competitive disadvantage against Chinese tech companies like Alibaba.
- Millennials love for technology offers a growth opportunity for Google.
- The rise of smart speakers is a growth opportunity for Google with its smart speaker continuing to be among the top selling.
- USA’s strong economic growth is a growth opportunity since it has boosted consumer confidence and buying power.
- The EU proposed copyright rules are threat to web platform companies like Google since it would require huge investments to comply with copyright changes, massively affecting American users.
- EU GDPR privacy rules pose a real threat to Google because they ultimately strike at the very heart of its operations, data collection.
- Rivalry between China and USA is a threat to Google since its likely to affect its operations in USA.
- Rise of seamless integration as user platforms such as Facebook or Amazon increasingly offer users one seamlessly integrated user experience is a threat to Google since it doesn’t offer the service.
- Adblocking is a threat to the company since consumers are continuously searching for ad free browsing
- The rise of AI and integrated voice search is a threat to Google especially the integration of voice search within other platforms such as social media (Facebook) and ecommerce (Amazon) which pose a real threat to Google’s dominance of search.
Figure 3: Googles Swot Analysis 2018-2019
Google has enjoyed success through the years surpassing its competitors like yahoo and Microsoft. However, the environmental analysis has discovered market trends that are likely to negatively impact the company’s growth and revenue. The rivalry between USA and China is a major trend the tech giant should watch out for as it will affect its revenue and expansion. The Trump China tariffs as a result of the tension between the two big powers is a major threat since the company and most of its competitors have operations in China or rely on China’s technology for most of their products. The new laws like China’s cyber security laws and the new EU proposed copyright laws should as well be watched out for as they will affect the company’s revenue and profits.
Nevertheless there are some growth opportunities in the market the company could cultivate to maintain its strong revenues which include; the growing usage of smart speakers, USA’s growing economy and millennials love for technology.
Chauhan Harsh (2018) “3 Artificial Intelligence trends that could boost your portfolio” The Motley Fool [Online] at https://www.fool.com/investing/2018/06/08/3-top-artificial-intelligence-trends-that-could-bo.aspx
Cooper Ryan (2017) “Google is a monopoly - and its crushing the internet” The Week [Online] at http://theweek.com/articles/693488/google-monopoly--crushing-internet
Country economy (2018) “United States (USA) GDP -Gross Domestic Product” [Online] at https://countryeconomy.com/gdp/usa
Cox Jeff (2018) “The US economy suddenly looks like its unstoppable” CNBC [Online] at https://www.cnbc.com/2018/06/01/the-us-economy-suddenly-looks-like-its-unstoppable.html
Gillis Justin and Popovich Nadja (2017) “The US is the biggest carbon polluter in history. It just walked away from the Paris climate deal.” The New York Times [Online] at https://www.nytimes.com/interactive/2017/06/01/climate/us-biggest-carbon-polluter-in-history-will-it-walk-away-from-the-paris-climate-deal.html
Graham Jefferson (2018) “Internet usage may be nearing peak, says Mary Meeker in annual tech forecast” USA Today [Online] at https://www.usatoday.com/story/tech/talkingtech/2018/05/30/internet-usage-growing-slightly-smartphone-sales-have-hit-wall/656078002/
Heitzman, Adam (2018) “How Google Came To Dominate Search And What The Future Holds” Forbes [Online] at https://www.forbes.com/sites/forbesagencycouncil/2017/06/05/how-google-came-to-dominate-search-and-what-the-future-holds/#7c5e5d003872
Horowitz Julia (2018) “Google NA FaceBook could be caught in the US-China trade war” CNN Business [Online] at https://money.cnn.com/2018/07/12/technology/trade-war-google-facebook-routers/index.html
Johnson, G., Scholes, K., Regner, P., Angwin, D., and Whittington, R. (2017) “Exploring strategy: Text and cases” 11th ed., Pearson Education.
Johnson Keith and Groll Elias (2018) “It’s no longer just a trade war between the US and China” Foreign Policy [Online] at https://foreignpolicy.com/2018/10/04/its-no-longer-just-a-trade-war-with-china-pence-spying/
Koetsier John (2018a) “Massive reversal: Google home sales explode 483% to beat Amazon echo for smart speaker crown” Forbes [Online] at https://www.forbes.com/sites/johnkoetsier/2018/05/25/massive-reversal-google-home-sales-explode-483-to-beat-amazon-for-smart-speaker-crown/#7c2fe155508c
Konish Lorie (2018) “Forget Faang. Invest in these technology trends” CNBC [Online] at https://www.cnbc.com/2018/07/10/forget-faang-invest-in-these-technology-trends-.html
Kuchler, H., & Khan, M (2018) “Activist Max Schrems accuses Facebook and Google of GDPR breach” Financial Times [Online] at https://www.ft.com/content/01d2d094-5f96-11e8-9334-2218e7146b04
Mintel (2018a) “Consumer trends, attitude and spending habits for the home -UK- January 2018” Mintel Academic.
Mintel (2018a) “Consumer trends, attitude and spending habits for the home -UK- January 2018” Mintel Academic.
Search Engine People (2018) “How millennials consume content (How to better engage them)” [Online] at https://www.searchenginepeople.com/blog/millennials-consume-content-better-engage.html
Shaban Hamza (2018) “The EU just voted to advance digital copyright rules that would force Google, FaceBook and others to pay up” The Washington Post [Online] at https://www.washingtonpost.com/technology/2018/09/12/eu-just-voted-advance-digital-copyright-rules-that-would-force-google-facebook-others-pay-up/?utm_term=.39d3e5e25454
Shepard, Greg (2018) “Ad Blockers Should Punish Individual Ads Rather Than Black-Listing Publishers” Adweek [Online] at https://www.adweek.com/digital/ad-blockers-should-punish-individual-ads-rather-than-black-listing-publishers/
Simonite Tom (2018) “Trump’s latest tariffs could hurt tech and even social media” Wired [Online] at https://www.wired.com/story/trumps-latest-china-tariffs-could-hurt-techand-even-social-media/
Statista (2018) “Google's revenue worldwide from 2002 to 2017 (in billion U.S. dollars) [Online] at https://www.statista.com/statistics/266206/googles-annual-global-revenue
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Tyler, Jessica (2018) “The 10 Most Valuable Brands in 2018” Inc. [Online] at https://www.inc.com/business-insider/amazon-google-most-valuable-brands-brand-finance-2018.html
UN Environment (2018) “UN Environment and Google announce ground-breaking partnership to protect our planet” [Online] at https://www.unenvironment.org/news-and-stories/press-release/un-environment-and-google-announce-ground-breaking-partnership
Wagner Daniel (2018) “China’s cyber security law is biased and open to abuse, but it may not stop others copying it” South China Morning Post [Online] at https://www.scmp.com/comment/insight-opinion/china/article/2152347/chinas-cybersecurity-law-biased-and-open-abuse-it-may
Wojazer Phillip (2018) “US government accuses Google of collaboration with China over Huawei ties” RT [Online] at https://www.rt.com/business/430517-google-china-huawei-us-authorities/
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